Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

Rui Dias; Paula Heliodoro; Nuno Teixeira; Teresa Godinho

doi:doi:10.11648/j.ijafrm.20200501.14

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Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets

Rui Dias, Paula Heliodoro, Nuno Teixeira, Teresa Godinho

Published in International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 1)

Received: 24 December 2019 Accepted: 2 January 2020 Published: 10 March 2020

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Abstract

The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 1) This article belongs to the Special Issue Perspectives on Risk Management and Impact on Sustainability of Companies
DOI	10.11648/j.ijafrm.20200501.14
Page(s)	40-51
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Financial Integration, Randow Walk Hypothesis, Arbitration, Portfolio Diversification

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Rui Dias, Paula Heliodoro, Nuno Teixeira, Teresa Godinho. (2020). Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets. International Journal of Accounting, Finance and Risk Management, 5(1), 40-51. https://doi.org/10.11648/j.ijafrm.20200501.14

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Rui Dias; Paula Heliodoro; Nuno Teixeira; Teresa Godinho. Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets. Int. J. Account. Finance Risk Manag. 2020, 5(1), 40-51. doi: 10.11648/j.ijafrm.20200501.14

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AMA Style

Rui Dias, Paula Heliodoro, Nuno Teixeira, Teresa Godinho. Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets. Int J Account Finance Risk Manag. 2020;5(1):40-51. doi: 10.11648/j.ijafrm.20200501.14

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@article{10.11648/j.ijafrm.20200501.14,
  author = {Rui Dias and Paula Heliodoro and Nuno Teixeira and Teresa Godinho},
  title = {Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {5},
  number = {1},
  pages = {40-51},
  doi = {10.11648/j.ijafrm.20200501.14},
  url = {https://doi.org/10.11648/j.ijafrm.20200501.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20200501.14},
  abstract = {The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.},
 year = {2020}
}

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TY  - JOUR
T1  - Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets
AU  - Rui Dias
AU  - Paula Heliodoro
AU  - Nuno Teixeira
AU  - Teresa Godinho
Y1  - 2020/03/10
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200501.14
DO  - 10.11648/j.ijafrm.20200501.14
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 40
EP  - 51
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200501.14
AB  - The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.
VL  - 5
IS  - 1
ER  -

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Author Information

Rui Dias

Department of Accounting and Finance, Business School of Setúbal, Setúbal, Portugal
Paula Heliodoro

Department of Accounting and Finance, Business School of Setúbal, Setúbal, Portugal
Nuno Teixeira

Department of Accounting and Finance, Business School of Setúbal, Setúbal, Portugal
Teresa Godinho

Department of Accounting and Finance, Business School of Setúbal, Setúbal, Portugal

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Rui Dias, Paula Heliodoro, Nuno Teixeira, Teresa Godinho. (2020). Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets. International Journal of Accounting, Finance and Risk Management, 5(1), 40-51. https://doi.org/10.11648/j.ijafrm.20200501.14

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Rui Dias; Paula Heliodoro; Nuno Teixeira; Teresa Godinho. Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets. Int. J. Account. Finance Risk Manag. 2020, 5(1), 40-51. doi: 10.11648/j.ijafrm.20200501.14

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AMA Style

Rui Dias, Paula Heliodoro, Nuno Teixeira, Teresa Godinho. Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets. Int J Account Finance Risk Manag. 2020;5(1):40-51. doi: 10.11648/j.ijafrm.20200501.14

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@article{10.11648/j.ijafrm.20200501.14,
  author = {Rui Dias and Paula Heliodoro and Nuno Teixeira and Teresa Godinho},
  title = {Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {5},
  number = {1},
  pages = {40-51},
  doi = {10.11648/j.ijafrm.20200501.14},
  url = {https://doi.org/10.11648/j.ijafrm.20200501.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20200501.14},
  abstract = {The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Equity Markets
AU  - Rui Dias
AU  - Paula Heliodoro
AU  - Nuno Teixeira
AU  - Teresa Godinho
Y1  - 2020/03/10
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200501.14
DO  - 10.11648/j.ijafrm.20200501.14
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 40
EP  - 51
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200501.14
AB  - The aim of this paper is to analyse integration and test the hypothesis of an efficient market, in its weak form, in sixteen international financial markets. The sample covers the period from January 2002 to July 2019 and is divided into three sub-periods. In order to achieve such an analysis, the aim is to provide answers to two questions. Has the global financial crisis intensified the financial integration of international markets? If there is a process of mean-reversion in the international stock markets, with arbitrage, the hypothesis of portfolio diversification will be feasible? The results suggest that the global financial crisis has intensified the integration level of international financial markets. Regarding random walk and market efficiency hypotheses, in its weak form, the results suggest the existence of a mean-reversion and the rejection of the hypothesis of information efficiency, in its weak form, in developed and emerging markets, European and non-European. In terms of portfolio diversification analysis, we see that levels of financial integration decreased significantly in the sub-period following the global financial crisis, namely with its respective benchmarks, such as the US market, Japan and Hong Kong. We can assess the existence of feasible diversification opportunities in the long term.
VL  - 5
IS  - 1
ER  -

Copy | Download